ITO 32 (2)(5), MUMBAI V. SHRI. PARESHKUMAR HIMATLAL SHAH, MUMBAI

ITA 49/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7945 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 02-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Tax effect; Set aside
• Section: 271(1)(c); 143(3); 147

Judgement Text

ITA NOS. 49 TO 51/MUM/2020 A.YS. 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER - 32(2)(5) VS. SHRI PARESH KUMAR HIMATLAL SHAH 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA NOS. 49 TO 51/MUM/2020 (ASSESSMENT YEAR S: 2009 10 TO 2011 - 12 ) INCOME TAX OFFICER - 32(2)(5) 719, 7 TH FLOOR, KAUTILYA BHAVAN, C - 41 TO C - 43, G GLOCK BKC, BANDRA EAST, MUMBAI 400 051 VS. SHRI PARESHKUMAR HIMATLAL SHAH , 301 NARBADA NIVAS RC PATEL ROAD, B/H ICICI BANK BORIVALI WEST, MUMBAI 400 092 PAN NO. AAFPS2328J ( REVENUE ) ( ASSESSEE ) ASSESSEE BY : NONE REVENUE BY : SHRI SHREEKALA PARDESHI , D.R DATE OF HEARING : 19 /07/2021 DATE OF PRONOUNCEMENT : 19 /07/2021 ORDER PER BENCH : THE CAPTIONED APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDER S PASSD BY THE CIT(A) - 44, MUMBAI, DATED 25.10.2019 WHICH IN TURN ARISES FROM THE ORDERS PASSED BY THE A.O U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 22.03.2018 FOR A.Y. 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12. AS COMMON ISSUES ARE INVOLVED IN THE AFOREMENTIONED APPEALS, THEREFORE THE SAME ARE BEING TAKEN UP AND DISPOSSED OFF BY WAY OF A CONSOLIDATED ORDER. WE SHALL FIRST TAKE UP THE APPEAL FOR A.Y. 200 9 - 10 THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOW ING GROUNDS BEFORE US: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, OF RS. 7,58,217/ - WITHO APPRECIATING THE ITA NOS. 49 TO 51/MUM/2020 A.YS. 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER - 32(2)(5) VS. SHRI PARESH KUMAR HIMATLAL SHAH 2 FACTS THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE TRANSACTIONS CLAIMED : ITS RETURN OF INCOME THEREBY EVADED TAXES TO THAT EXTENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) ERRED IS NOT APPRECIATING THE FACT THAT THE ACT OF ASSESSEE CLEARLY FALLS WITHIN THE AMBIT OF PROVISIONS C EXPLANATION - 1 TO SECION 271(1)(C) OF THE ACT AS THE ASSESSEE HAD FAILED TO OFFER AN EXPLANATIOI OR WHICH WAS FOUND BY THE A.O TO BE FALSE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE A.O, U/S 271(1)( C) OF THE I.T. ACT, 1961 OF RS.7,58,217/ - WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE CLAIMED BOGUS PURCHASES IN ITS RETURN OF IN COME THEREBY MAKING HIMSELF LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT, 1961. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT IS REQUESTED TO ENTERTAIN THIS APPEAL THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT PRESCRIBED IN THE CBDT CIRCULAR NO 17/2019 DATED 08.08.2019 R.W CIRCULAR NO. 3/2018 DTD. 11/07/2018 AS AMENDED ON 20.08.2018 AS THE CASE FALLS IN THE EXCEPTION PROVIDED IN PARA 10(E) OF THE SAID CIRCULAR IN AS MUCH AS THE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTE RNAL SOURCES IN THE NATURE OF LAW - ENFORCEMENT AGENCI ES NAMELY SALES TAX AUTHORITIES. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORE. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 22.09.2009, DECLARING A TOTAL INCOME OF RS.7,64,960/ - . SUBSEQUENTLY, O N THE BASIS OF INFORMATION RECEIVED BY THE A.O THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED CERTAIN BOGUS PURCHASE BILLS AGGREGATING TO RS.1,74,43,835/ - , HIS CASE WAS REOPENED U/S 147 OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WA S OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES AGGREGATING TO RS.1,74,43,835/ - FROM 16 TAINTED PARTIES. AS THE ASSESSEE FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS, THEREFORE, THE A .O HOLDING A CONVICTION THAT THE PURCHASES WERE MADE BY THE ASSESSEE NOT FROM THE AFOREMENTIONED HAWALA PARTIES, BUT AT A DISCOUNTED VALUE FROM THE OPEN/GREY MARKET, THUS , DISALLOWD 12.5% OF THE IMPUGNED PURCHASES OF RS.1,75,19,573/ - AND MADE A CONSEQUENTI AL ADDITION OF RS.21,89,946/ - . ACCORDINGLY, THE A.O VIDE HIS ORDER PASSED U/S 143(3) R.W.S 147, DATED 02.03.2015 ASSESSED THE INCOME AT RS.29,54,910/ - . ITA NOS. 49 TO 51/MUM/2020 A.YS. 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER - 32(2)(5) VS. SHRI PARESH KUMAR HIMATLAL SHAH 3 4. AFTER THE CULMINATION OF THE ASSESSMENT PROCEEDINGS, THE A.O VIDE HIS ORDER PASSED U/S 271(1)(C), DAT ED 22.03.2018 IMPOSED A PENATLY OF RS.7,58,217/ - QUA THE ADDITION/DISALLOWANCE MADE WITH RESPECT TO THE IMPUGNED PURCHASES. 5. AGGRIEVED, THE ASSESE ASSAILED THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C), DATED 22.03.2018 BEFORE THE CIT(A). OBSERVING, THAT THE A.O HAD MERELY ON AN ESTIMATE BASIS MADE THE ADDITION/DISALLOWANCE @ 12.5% OF THE IMPUGNED PURCHASES, THE CIT(A) WAS OF THE VIEW THAT NO PENALTY U/S 271(1)(C) IN THE ABSENSE OF ANY OBSERVATIONS WITH REGARD TO INCORRECTNESS OF THE DETAILS FILED BY THE ASSESSEE COULD HAVE VALIDLY BEEN IMPOSED. ACCORDINGLY, THE CIT(A) VACATED THE PENATLY IMPOSED BY THE A.O U/S 271(1)(C) OF THE ACT. 6. THE REVENUE BEING AGGREIVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. ALTHOUGH, THE A SSESSEE RESPONDENT WAS PUT THE NOTICE AS REGARDS THE HEARING OF THE APPEAL, HOWEVER , HE HAD FAILED TO PUT UP AN APPEARANCE. ACCORDINGLY, WE ARE CONSTRAINED TO PROCEED WITH THE APPEAL AS PER RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1962 AFTER HEARING THE AP PELLANT REVENUE. IT WAS SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) THAT THOUGH THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL WAS BELOW THE MONETARY LIMIT PRESCRIBED IN CBDT CIRCULAR NO .12/2019, DATED 08.08.2019 R.W. CIRCULAR NO. 3/2018, DATED 11.07.2018 (AS AMENDED ON 20.08.2018), HOWEVER , AS THE CASE FALLS WITHIN THE REALM OF THE EXCEPTION PROVIDED IN P ARA 10(E) OF THE AFORESAID CIRCULAR, THEREFORE, THE PRESENT APPEAL WAS MAINTAINABLE: 7 . WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS CONSIDERED THE CBDT CIRCULARS AS HAD BEEN RELIED UPON BY THEM TO DRIVE HOME THEIR RESPECTIVE CONTENTIONS. ADMITTEDLY, THE ASS ESSEE HAD BEEN SADDLED WITH AN ADDITION/DISALLOWANCE OF THE IMPUGNED BOGUS PURCHASES OF RS.21,89,946/ - W.R.T THE IMPUGNED PURCHASES WHICH WERE CLAIMED BY IT TO HAVE BEEN MADE FROM CERTAIN CONCERN S . AS IS DISCERNIBLE FROM THE ASSESSMENT ORDER, THE AFORESAID PURCHASES WERE DISALLOWED BY THE A.O, FOR THE REASON , THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS TO THE SATISFACTION OF THE A.O. BACKED BY THE AFORESAID ADDITION, THE ITA NOS. 49 TO 51/MUM/2020 A.YS. 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER - 32(2)(5) VS. SHRI PARESH KUMAR HIMATLAL SHAH 4 A.O HAD THEREAFTER IMPOSED PENALTY UNDER SEC. 271(1)(C) OF RS. 7,58,217 / - ON THE ASSESSEE . ON APPEAL, THE CIT(A) VACATED THE PENALTY IMPOSED BY THE A.O U/S 271(1)(C) OF THE ACT. 8 . AS IS DISCERNIBLE FROM THE RECORDS , THE QUANTUM OF PENALTY UNDER DISPUTE IS RS. 7,58,217 / - WHICH IS SUBSTANTIALLY BE LOW THE THRESHOLD LIMIT OF RS.50 LAC AS HAD BEEN PROVIDED IN THE LATEST CBDT CIRCULAR NO. 17/2019, DATED 08.08.2019, THAT CONTEMPLATES THE TAX EFFECT FOR FILING OF THE APPEALS BY THE REVENUE. IT IS THE CLAIM OF THE LD. D.R THAT AS THE PRESENT APPEAL IS COV ERED BY THE EXCEPTION CARVED OUT IN CLAUSE 10(E) OF THE CBDT CIRCULAR NO. 3 OF 2018 (AS AMENDED ON 20.08.2018) THUS, THE APPEAL FILED BY THE REVENUE IS MAINTAINABLE. 9 . BEFORE ADVERTING ANY FURTHER IT WOULD BE RELEVANT TO CULL OUT THE EXCEPTION CARVED OU T IN CLAUSE 10(E) OF THE CBDT CIRCULAR NO. 3/2018 (AS AMENDED ON 20.08.2018), WHICH READS AS UNDER: 10. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: - (A) TO (D) . (E) WHERE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES SUCH AS CBI / ED / DRI / SFIO / DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI). ADMITTEDLY, IT IS A SETTLED POSITION OF LA W THAT QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE INDEPENDENT AND DISTINCT PROCEEDINGS AND CONFIRMATION OF AN ADDITION CANNOT ON A STANDALONE BASIS JUSTIFY IMPOSITION/UPHOLDING OF A PENALTY U/S 271(1)(C) OF THE ACT. ADOPTING THE SAME LOGIC, WE ARE OF THE CONSIDERED VIEW THAT UNLESS A SPECIFIC EXCEPTION IS PROVIDED IN THE CIRCULAR W.R.T PENALTY ALSO, IT COULD BY NO MEANS BE CONSTRUED THAT PENALTY WAS TO BE TREATED AT PAR WITH THE QUANTUM ADDITIONS. AS IS DISCERNIBLE FROM CLAUSE 10(E) OF THE AFORESAID CB DT CIRCULAR NO. 3/2018 (AS AMENDED ON 20.08.2018), THE SAME APPLIE S ONLY TO ADDITIONS WHICH WERE BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES. AS NOTICED BY US HEREINABOVE, SINCE THE LEVY OF PENALTY BY NO MEANS COULD BE CONSTRUED AS AN ADDITION WITH IN THE MEANING OF CLAUSE 10(E) OF THE AFORESAID CIRCULAR, THEREFORE, WE DO NOT FIND ANY MERIT IN THE CONTENTIONS ADVANCED BY THE LD. D.R THAT THE AFORESAID EXCEPTION ITA NOS. 49 TO 51/MUM/2020 A.YS. 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER - 32(2)(5) VS. SHRI PARESH KUMAR HIMATLAL SHAH 5 CARVED OUT IN THE CBDT CIRCULAR NO. 3/2018 (SUPRA) WOULD ALSO TAKE WITHIN ITS REALM A PENA LTY IMPOSED UNDER SEC. 271(1)(C) W.R.T THE ADDITIONS MADE BY THE A.O TOWARDS BOGUS PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, I.E AN EXTERNAL AGENCY. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE APPEAL OF THE REVENUE I S COVERED BY THE CBDT CIRCULAR NO. 17/2019, DATED 08.08.2019, AND THUS, IN OUR CONSIDERED VIEW IS NOT MAINTAINABLE. ACCORDINGLY, WE HEREIN DISMISS THE APPEAL OF THE REVENUE, FOR THE REASON, THAT THE TAX EFFECT THEREIN INVOLVED IS LOWER THAN THAT CONTEMPLAT ED IN THE AFORESAID CBDT CIRCULAR FIXING THE MONETARY LIMIT OF FILING OF APPEALS BY THE REVENUE BEFORE THE TRIBUNAL. 10 . RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NOS. 50 & 51/MUM/2020 (ASSESSMENT YEARS: 2010 - 11 & 2011 - 12) 11 . AS THE FACTS AND THE ISSUE INVOLVED IN THE APPEALS FILED BY THE REVENUE FOR A.Y. 2010 - 11 AND A.Y. 2011 - 12 IN ITA NOS. 50 & 51/MUM/2020 REMAINS THE SAME AS WERE THERE BEFORE US IN THE AFOREMENTIONED APPEAL OF THE REVENUE FOR A.Y. 2009 - 10 IN ITA NO. 49/MUM/2 020, THEREFORE, OUR ORDER PASSED WHILE DISPOSSING OFF THE APPEAL FOR A.Y.2009 - 10 SHALL APPLY MUTATIS MUTANDIS FOR THE PURPOSE OF DISPOSAL OF THE SAID APPEALS FOR A.Y. 2010 - 11 AND A.Y. 2011 - 12. ACCORDINGLY, ON THE SAME TERMS THE AFOREMENTIONED APPEALS OF TH E REVENUE ARE DISMISSED. 12 . RESULTANTLY THE APPEALS OF THE REVENUE FOR A.YS. 2009 - 10 TO 2011 - 12 I.E ITA NOS. 49 TO 51/MUM/2020 ARE DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 19. 07.2021 SD/ - SD/ - (RAJESH KUMAR) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 19 .07.2021 PS: ROHIT ITA NOS. 49 TO 51/MUM/2020 A.YS. 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER - 32(2)(5) VS. SHRI PARESH KUMAR HIMATLAL SHAH 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY)